It looks like J. Crew Group Inc.’s future might lead to Wall Street rather than Tokyo.
The private equity-owned fashion firm had been in very preliminary talks to be acquired by Fast Retailing Co. Ltd., but as WWD reported Friday, the Japanese giant balked at the $5 billion price tag being bandied around in the press. Numerous reports on Tuesday said the discussions had broken down entirely.
That appears to make a return to the public markets more likely for J. Crew, which is said to have been working on an initial public offering with Goldman Sachs. Such a move would also keep the pressure on chairman and chief executive officer Millard “Mickey” Drexler, who is very well regarded in investment circles and would have to grapple with high expectations for the offering.
J. Crew already files its financial results with the Securities and Exchange Commission because of its publicly held debt and could relatively easily put together the paperwork for an IPO. And now, the market’s been primed for a valuation that would be favorable for the company’s owners.
TPG and Leonard Green & Partners teamed with Drexler to take the company private for $3 billion in 2011. The investors have paid themselves some hefty dividends, including nearly $200 million in December 2012 and another $484 million following a bond offering in November.
The $5 billion price tag that was being talked about in a potential deal with Fast Retailing valued the retailer at about 13.5 times earnings before interest, taxes, depreciation and amortization. It was seen as a hefty price and one that only a strategic player like Fast Retailing, which could cut costs by combining operations, could afford. Fast Retailing could also use J. Crew’s expertise to expand Uniqlo in the U.S. while helping J. Crew step out internationally.
J. Crew’s earnings growth has been slowing, complicating a potential sale. Adjusted EBITDA rose 27.4 percent to $359.6 million in 2012, but rose about 2.9 percent to around $370 million last year.
Financial sources said word of the talks with Fast Retailing might have been leaked by J. Crew’s owners in an effort to move the deal along. If so, the tactic appears to have misfired since Fast Retailing was said to be unhappy that the discussions were made public.
But, although talks were reported to have broken down, Fast Retailing is not seen as entirely out of the picture.
The company’s chairman, president and ceo, Tadashi Yanai, is known as an admirer of Drexler with a history of perusing U.S. retailers, having said to have kicked the tires at Gap Inc., American Eagle Outfitters Inc. and Aéropostale Inc. over the years.
If J. Crew were to file paperwork for an IPO, that would put pressure — essentially the virtues of a deadline — on Fast Retailing and any other would-be suitor to make their move. It also would expose J. Crew’s investors to the vagaries of the public markets and a longer exit from their investment, since such investors would typically only sell a portion of their equity in the process.
This is a well-worn dance in the world of high finance.
Neiman Marcus’ owners, TPG and Warburg Pincus, were said to have been looking to exit their investment for some time, filed paperwork for a public offering and then turned around and sold to Ares Management and the Canada Pension Plan Investment Board for $6 billion, or 9.5 times EBITDA, in October.
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye
"Nowadays when life is not so happy with everything going on in the world, I think people come to me for a little bit of whimsy and color and fun." - Designer Rebecca De Ravenel on her cult-favorite jewelry line. (📸 : @vsteves) #wwd40
“Everyone is talking about how the retail industry is struggling, but I think it’s an incredible time because brands who are doing something different and innovative are setting themselves up for the future,” said @adamgoldston, who founded the luxury athletic brand @apl with his brother @ryangoldsten. The Goldston’s are part of WWD’s 40 under 40: a group of industry notables. See the rest of the list on WWD.com. (📷: @vsteves) #wwd40
@eyeswoon blogger Athena Calderone debuted her first-ever cookbook, “Cook Beautiful,” which is heavily centered on the presentation and visual expression of food. Pictured here are her miso glazed carrots from the book. Get the recipe on WWD.com. (📷: @johnny_miller_) #wwdeye
“It’s passion that helps get anybody to a certain point and it’s what’s propelled me,” said Kith founder @ronniefieg, one of WWD’s 40 under 40: a group of industry notables who are changing the face of retail, fashion and beauty. Fieg, who opened a Manhattan flagship on October 7, began his career at age 13 as a stock boy and salesman for footwear chain David Z. “I think staying true to [my] beliefs, hard work and passion have gotten me to where [Kith] is today.” See the rest of the 40 at WWD.com. (📷: @vsteves) #wwd40
25-year-old @samweaving is about to break out this fall, starring in Netflix’s horror film “The Babysitter,” fittingly out today on Friday the 13th. That’s not the only place you’ll be seeing her, though — Weaving’s got a role Showtime’s “SMILF” and another alongside Frances McDormand and Woody Harrelson in “Three Billboards Outside Ebbing, Missouri.” Though she’s got a full plate at the moment, there’s one role she’s got her eye on: Marilyn Monroe. “I’m a little too young at the moment, but it’s on my bucket list,” the actress told WWD (📷: @dandoperalski) #wwdeye
BFF's Poppy Jamie and Suki Waterhouse celebrated the launch of their bag line Pop x Suki at Nordstrom last night. "The line is really about our friendship, and how we are so different but complement each other," said Waterhouse. 👯 (📷: Katie Jones) #wwdeye
After designing the new @louisvuitton and @bulgariofficial flagships and a @chanelofficial boutique opening in Japan, @petermarinoarchitect has another project on his plate: The Lobster Club. Located in the Seagram Building, it’s the famed architect’s first restaurant project in New York, serving up modern Japanese brasserie-style cuisine. Bronze hues, bespoke material detailing, blush and chartreuse tones and a heavy emphasis on Picasso can be seen throughout. Mark your calendars for Nov. 1 for the much-anticipated opening. (📷: @clint_spaulding) #wwdeye
Did you know: @carlychaikin of "Mr. Robot" has been painting for about a decade? The actress, who plays Darlene on the show, is a self-taught artist who lists Salvador Dalí and Chuck Close as some of her idols. Chaikin told WWD that painting is a form of meditation for her — A much-needed one given the intensity of "Mr. Robot." See a piece Chaikin is working on at WWD.com (📷: @jilliansollazzo) #wwdeye